California Resources Corporation Announces First Quarter 2021 Results and $150 Million Share Repurchase Program

SANTA CLARITA, Calif.–(BUSINESS WIRE)–California Resources Corporation (NYSE: CRC), an independent oil and natural gas exploration and production company, today reported first quarter 2021 operational and financial results.

“CRC delivered on its strategy with strong first quarter results while maintaining solid environmental and safety records,” said Mac McFarland, President and Chief Executive Officer. “Given the positive first quarter results, supported by the previously announced capital structure simplification through a senior debt offering and the recent amendment to our Revolving Credit Facility, CRC’s Board of Directors authorized a $150 million Share Repurchase Program. This promising step underpins our robust financial fundamentals which are further strengthened by CRC’s 2021 projected free cash flow1. As CRC is tracking to the high end of 2021 free cash flow1 guidance, we will look for additional ways to return capital to our shareholders as the year progresses.”

First Quarter 2021 Highlights

Financial

Reported a net loss attributable to common stock of $94 million, or $1.13 per diluted share. Adjusted net income1 was $102 million, or $1.22 per diluted share

Generated adjusted EBITDAX1 of $189 million and free cash flow1 of $120 million

Reaffirmed 2021 free cash flow1 guidance and optimized CRC investment dollars by shifting $15 million from drilling and completions to downhole maintenance projects which provide efficiencies and faster payouts

Closed the quarter with $130 million of cash on hand, an undrawn credit facility and $545 million of liquidity2

Simplified CRC’s capital structure with a senior unsecured $600 million debt offering

Subsequent to quarter end, signed an amendment to its Revolving Credit Facility which provides CRC with additional strategic flexibility with regard to returning capital to shareholders and to future hedging levels, and completed the borrowing base review which set the borrowing base at $1.2 billion

Quarterly operating costs were $164 million and general and administrative (G&A) expenses were $48 million, a reduction of 15% and 20%, respectively, as compared to 1Q20

Generated net cash provided by operating activities of $147 million with quarterly capital expenditures of $27 million

Operational

Produced an average of 99,000 net barrels of oil equivalent (BOE) per day, including 60,000 barrels per day of oil

Maintained industry leading HSE standards

Operated one drilling rig in the San Joaquin Basin; operated 30 maintenance rigs; drilled 17 wells (15 online in 1Q21, final two online in 2Q21); and completed 40 capital workovers

2021 Guidance

Given the strength of the first quarter results, CRC reaffirmed previously issued 2021 free cash flow1 guidance of $250 to $350 million and it sees 2021 free cash flow1 trending towards the high end of the stated guidance range. Recognizing capital efficiency improvements and faster payouts on downhole maintenance projects, CRC revised its operating and capital guidance by shifting $15 million of drilling and completions capital to these opportunities. CRC made $27 million of capital investments in the first quarter of 2021. The current capital program anticipates CRC to gradually increase quarterly investment throughout the year if the commodity environment continues to strengthen. If commodity prices decline significantly from current levels, CRC may need to adjust its capital program in response to market conditions. The Company’s capital program will be dynamic in response to oil market volatility while focusing on maintaining its oil production, strong liquidity and maximizing its free cash flow.

 

 

 

 

 

 

 

 

 

 

2021E TOTAL YEAR GUIDANCE

 

 

 

Total Year 2021E

 

 

 

 

 

Total Production (Mboe/d)

 

 

 

96 – 99

Oil Production (Mbo/d)

 

 

 

60 – 62

Operating Costs ($ millions)

 

 

 

$615 – $630

General and administrative expenses ($ millions)

 

 

 

$180 – $190

Capital ($ millions)

 

 

 

$185 – $210

Free cash flow ($ millions)1

 

 

 

$250 – $350

Initiating a Share Repurchase Program

In May 2021, CRC’s Board of Directors authorized a Share Repurchase Program (SRP) to acquire up to $150 million of CRC’s common stock through March 31, 2022. The repurchases may be affected from time-to-time through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, accelerated stock repurchases, derivative contracts or otherwise in compliance with Rule 10b-18, subject to market conditions. The SRP does not obligate CRC to repurchase any dollar amount or number of shares and CRC’s Board of Directors may modify, suspend, or discontinue authorization of the program at any time. The Share Repurchase Program expires on March 31, 2022.

Sustainability Update

CRC remains dedicated to environmental stewardship and will continue to deliver on its 2030 Sustainability Goals. Given significant progress on CRC’s Water and Methane goals, management and the Board are reviewing the current ESG initiatives to enhance them with a strengthened decarbonization strategy. This review will focus particularly on actionable energy transition opportunities including carbon capture, utilization and storage (CCUS), solar power and other renewable projects. The Company expects to provide additional details about this approach next quarter.

Underscoring CRC’s commitment to safe and responsible production, the Company’s ESG performance and progress on its 2030 Sustainability Goals, which align with California’s climate goals toward carbon neutrality in accordance with the Paris Climate Accord, are directly tied to the performance-based compensation of its executives, senior managers and employees. The Board, through its Operations and Sustainability Committee, will continue to highlight, monitor and provide guidance to CRC’s efforts to serve as a responsible steward of California’s natural resources, safeguard people and the environment, and advance California’s long-term goals.

Fresh Start Accounting and Predecessor and Successor Periods

Upon emergence from Chapter 11 bankruptcy proceedings on October 27, 2020, CRC adopted and applied fresh start accounting at which point we became a new entity for financial reporting purposes. We adopted an accounting convenience date of October 31, 2020 for the application of fresh start accounting. As a result of the application of fresh start accounting and the effects of the implementation of the plan of reorganization, the financial statements after October 31, 2020 may not be comparable to the financial statements prior to that date. References to “Predecessor” refer to the Company for periods ended on or prior to October 31, 2020 and references to “Successor” refer to the Company for periods subsequent to October 31, 2020.

First Quarter 2021 Results

 

Successor

 

 

 

Predecessor

 

1st Quarter

 

 

 

1st Quarter

($ and shares in millions, except per share amounts)

2021

 

 

 

2020

 

 

 

 

 

 

Statements of Operations:

 

 

 

 

 

Revenues

 

 

 

 

 

Total revenues

363

 

 

 

 

573

 

 

 

 

 

 

 

Costs and Other

 

 

 

 

 

Total costs and other

436

 

 

 

 

2,222

 

Operating Loss

(73)

 

 

 

 

(1,649)

 

Net Loss Attributable to Common Stock

$

(94)

 

 

 

 

$

(1,796)

 

 

 

 

 

 

 

Net loss attributable to common stock per share – basic and diluted

$

(1.13)

 

 

 

 

$

(36.43)

 

Adjusted net income (loss)

$

102

 

 

 

 

$

(8)

 

Adjusted net income (loss) per share – basic and diluted

$

1.22

 

 

 

 

$

(0.16)

 

Weighted-average common shares outstanding – basic and diluted

83.3

 

 

 

 

49.3

 

Adjusted EBITDAX

$

189

 

 

 

 

$

251

 

 

Successor

 

 

 

Predecessor

 

1st Quarter

 

 

 

1st Quarter

($ in millions)

2021

 

 

 

2020

Cash Flow Data:

 

 

 

 

 

Net cash provided by operating activities

$

147

 

 

 

 

$

228

 

Net cash used by investing activities

$

(20)

 

 

 

 

$

(12)

 

Net cash used by financing activities

$

(25)

 

 

 

 

$

(156)

 

Review of Operating and Financial Results

Total daily net production volumes decreased 18% from 121,000 BOE per day for the first quarter of 2020 to 99,000 BOE per day for the first quarter of 2021. The decrease from the same period in 2020 was primarily due to limited drilling activity and capital investment during the prior twelve months. Production was also negatively impacted by approximately 1,000 BOE per day in the first quarter of 2021 due to downtime at one of CRC’s gas processing plants. Production sharing type contracts (PSC-type) at CRC’s Long Beach assets negatively impacted oil production by approximately 2,600 BOE per day in the first quarter of 2021 compared to the same prior-year period. CRC’s total daily production decreased by approximately 15% compared to the same period in 2020 after excluding the impact of PSC-type contracts and unscheduled downtime at one of its gas processing plants. See Attachment 3 for further information on production.

Realized oil prices, including the effect of settled hedges, decreased by $1.77 per barrel from $55.50 per barrel in the first quarter of 2020 to $53.73 per barrel in the first quarter of 2021. Realized oil prices were lower in the first quarter of 2021 compared to the same prior-year period primarily due to settlement payments on commodity contracts, compared to receipts from commodity contracts in the first quarter of 2020, despite an increase in benchmark prices between comparative periods. See Attachment 4 for further information on prices.

Adjusted EBITDAX1 for the first quarter of 2021 was $189 million and net cash provided by operating activities was $147 million. Internally funded capital invested during the first quarter of 2021 was $27 million. Free cash flow1 was $120 million. CRC’s adjusted EBITDAX1 is not reduced by the one-time restructuring charge of $14 million related to its workforce reductions during the three months ended March 31, 2021.

FREE CASH FLOW

 

 

 

 

 

 

 

 

 

 

 

Management uses free cash flow, which is defined by us as net cash provided by operating activities less capital investments, as a measure of liquidity. The following table presents a reconciliation of our net cash provided by operating activities to free cash flow. We have excluded one-time costs for bankruptcy related fees during 2021 and 2020 as a supplemental measure of our free cash flow.

 

 

 

 

 

 

 

 

Successor

 

 

Predecessor

 

 

1st Quarter

 

 

1st Quarter

($ millions)

 

2021

 

 

2020

 

 

 

 

 

 

Net cash provided by operating activities

 

$

147

 

 

 

 

$

228

 

 

Capital investments

 

(27

)

 

 

 

(30

)

 

Free cash flow

 

120

 

 

 

 

198

 

 

One-time bankruptcy related fees

 

2

 

 

 

 

5

 

 

Free cash flow, after special items

 

$

122

 

 

 

 

$

203

 

 

Operating costs for the first quarter of 2021 were $164 million, compared to $192 million for the first quarter of 2020. The decrease was primarily attributable to efficiencies and streamlining of CRC’s operations, including headcount reductions in the second half of 2020 and in the first quarter of 2021. Operating costs per BOE are presented below:

OPERATING COSTS PER BOE

 

 

 

 

 

 

The reporting of our PSC- type contracts creates a difference between reported operating costs, which are for the full field, and reported volumes, which are only our net share, inflating the per barrel operating costs. The following table presents operating costs after adjusting for the excess costs attributable to PSC-type contracts.

 

 

 

 

 

 

 

 

Successor

 

 

Predecessor

 

 

1st Quarter

 

 

1st Quarter

($ per Boe)

 

2021

 

 

2020

Energy operating costs (a)

 

$

4.70

 

 

 

 

$

3.71

 

 

Gas processing costs

 

0.53

 

 

 

 

0.67

 

 

Non-energy operating costs (b)

 

13.10

 

 

 

 

13.00

 

 

Operating costs

 

$

18.33

 

 

 

 

$

17.38

 

 

Excess costs attributable to PSC-type contracts

 

(1.61

)

 

 

 

(0.90

)

 

Operating costs, excluding effects of PSC-type contracts

 

$

16.72

 

 

 

 

$

16.48

 

 

 

 

 

 

 

 

(a) Energy operating costs include purchases of fuel gas and electricity used in our operations and internal costs to produce electricity used in our fields.

(b) Non-energy operating costs equal total operating costs less energy operating costs and gas processing costs.

G&A expenses were $48 million for the first quarter of 2021, compared to $60 million in the same prior-year period. The decrease in G&A expenses resulted from efficiencies and streamlining of CRC’s operations, including a $7 million decrease in employee related expenses as a result of workforce reductions. We expect CRC’s quarterly G&A expenses to modestly trend down throughout the year from current levels.

CRC reported taxes other than on income of $40 million for the first quarter of 2021, compared to $41 million for the same prior-year period. Exploration expense was $2 million for the first quarter of 2021 and $5 million in the first quarter of 2020.

Balance Sheet and Liquidity Update

In January 2021, CRC further simplified its balance sheet by completing an offering of $600 million in aggregate principal amount of its 7.125% senior unsecured notes due 2026. The net proceeds of $588 million, after $12 million of debt issuance costs, were used to repay in full CRC’s Second Lien Term Loan and EHP Notes. The remaining proceeds were used to pay down substantially all of CRC’s then outstanding Revolving Credit Facility.

CRC’s aggregate commitment of $540 million as of March 31, 2021 was automatically reduced to $492 million in April 2021 pursuant to the terms of CRC’s Revolving Credit Facility. The borrowing base for the Revolving Credit Facility is redetermined around April and October of each year and was most recently set at $1.2 billion in May 2021. The amount CRC is able to borrow under the Revolving Credit Facility is limited to the amount of the commitment described above.

In May 2021, CRC amended its Revolving Credit Facility to provide further strategic flexibility with respect to CRC’s minimum and maximum hedging restrictions and to increase CRC’s capacity to make certain restricted payments, including paying dividends on its common stock and repurchasing its common stock.

Based on the timing of anticipated cash distributions to Benefit Street Partners (BSP) at current commodity prices, CRC believes the preferred interest held by BSP in its development joint venture could be automatically redeemed early in the fourth quarter of 2021.

Operational Update

During the first quarter of 2021, CRC operated one drilling rig in the San Joaquin Basin, drilled 17 net wells, 15 of which were brought online, and completed 40 capital workovers. Subsequent to the end of the first quarter, CRC added a second drilling rig and increased its maintenance rigs to 38. The San Joaquin basin produced 73,000 net BOE per day. The Los Angeles basin produced 20,000 net BOE per day, the Ventura basin produced 3,000 net BOE per day and the Sacramento basin produced 3,000 net BOE per day.

Organization Changes

In connection with CRC’s emergence from bankruptcy, its Board of Directors was reconstituted in October 2020. On December 31, 2020, CRC’s former President, Chief Executive Officer and director Todd A. Stevens departed and Mark A. (Mac) McFarland was appointed as interim Chief Executive Officer in addition to his role as Chair of CRC’s Board of Directors. On March 22, 2021, the Board of Directors appointed Mr. McFarland as President and Chief Executive Officer on a permanent basis. On April 15, 2021, Tiffany (TJ) Thom Cepak replaced Mr. McFarland as the Chair of CRC’s Board of Directors. Mr. McFarland will continue to serve as a director.

On April 30, 2021, Noelle M. Repetti was appointed Principal Accounting Officer. Mrs. Repetti joined CRC in 2014 as Vice President – Tax, and she assumed additional duties and was appointed Vice President and Controller in August 2017. On May 1, 2021, Jay Bys was appointed Chief Commercial Officer responsible for CRC’s marketing and trading operations. Mr. Bys has nearly 30 years of experience across various segments of the energy industry in senior management roles. He will oversee the integration of CRC’s renewable energy efforts.

Conference Call Details

To participate in the conference call scheduled for later today at 11:00 a.m. Eastern Time, please dial (877) 328-5505 (International calls please dial +1 (412) 317-5421) or access via webcast at www.crc.com 15 minutes prior to the scheduled start time to register. Participants may also pre-register for the conference call at https://dpregister.com/sreg/10153648/e58af1b180. A digital replay of the conference call will be archived for approximately 90 days and supplemental slides for the conference call will be available online in the Investor Relations section of www.crc.com.

1 See Attachment 2 for the non-GAAP financial measures of adjusted EBITDAX, operating costs per BOE (excluding effects of PSC-type contracts), adjusted net income (loss) and free cash flow, including reconciliations to their most directly comparable GAAP measure, where applicable.
2 Calculated as $130 million of cash plus $540 million of capacity on CRC’s Revolving Credit Facility less $125 million in letters of credit.

About California Resources Corporation

California Resources Corporation (CRC) is an independent oil and natural gas exploration and production company, applying complementary and integrated infrastructure to gather, process and market its production. Using advanced technology, CRC focuses on safely and responsibly supplying affordable energy.

Forward-Looking Statements

The information included herein contains forward-looking statements that involve risks and uncertainties that could materially affect CRC’s expected results of operations, liquidity, cash flows and business prospects. Such statements include those regarding CRC’s expectations as to its future:

financial position, liquidity, cash flows and results of operations

business prospects

transactions and projects

operating costs and general and administrative expenses

operations and operational results including production, hedging and capital investment

budgets and maintenance capital requirements

reserves

type curves

expected synergies from acquisitions and joint ventures

Actual results may differ from anticipated results, sometimes materially, and reported results should not be considered an indication of future performance. While CRC believes assumptions or bases underlying its expectations are reasonable and make them in good faith, they almost always vary from actual results, sometimes materially. CRC also believes third-party statements it cites are accurate but have not independently verified them and do not warrant their accuracy or completeness. Factors (but not necessarily all the factors) that could cause results to differ include:

CRC’s ability to execute its business plan post-emergence

the volatility of commodity prices and the potential for sustained low oil, natural gas and natural gas liquids prices

impact of CRC’s recent emergence from bankruptcy on its business and relationships

debt limitations on CRC’s financial flexibility

insufficient cash flow to fund planned investments, interest payments on CRC’s debt, debt repurchases or changes to CRC’s capital plan

insufficient capital or liquidity, including as a result of lender restrictions, unavailability of capital markets or inability to attract potential investors

limitations on transportation or storage capacity and the need to shut-in wells

inability to enter into desirable transactions including acquisitions, asset sales and joint ventures

CRC’s ability to utilize its net operating loss carryforwards to reduce its income tax obligations

legislative or regulatory changes, including those related to drilling, completion, well stimulation, operation, maintenance or abandonment of wells or facilities, managing energy, water, land, greenhouse gases (GHGs) or other emissions, protection of health, safety and the environment, or transportation, marketing and sale of CRC products

joint ventures and acquisitions and CRC’s ability to achieve expected synergies

the recoverability of resources and unexpected geologic conditions

incorrect estimates of reserves and related future cash flows and the inability to replace reserves

changes in business strategy

production-sharing contracts’ effects on production and unit operating costs

the effect of CRC’s stock price on costs associated with incentive compensation

effects of hedging transactions

equipment, service or labor price inflation or unavailability

availability or timing of, or conditions imposed on, permits and approvals

lower-than-expected production, reserves or resources from development projects, joint ventures or acquisitions, or higher-than-expected decline rates

disruptions due to accidents, mechanical failures, power outages, transportation or storage constraints, natural disasters, labor difficulties, cyber attacks or other catastrophic events

pandemics, epidemics, outbreaks, or other public health events, such as the COVID-19

factors discussed in Item 1A, Risk Factors in CRC’s Annual Report on Form 10-K available at www.crc.com.

Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “target, “will” or “would” and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Attachment 1

SUMMARY OF RESULTS

 

 

 

 

Successor

 

 

 

Predecessor

 

Combined
(Non-
GAAP)

 

 

Successor

 

 

 

Predecessor

 

1st Quarter

 

 

 

1st Quarter

 

4th Quarter

 

 

4th Quarter

 

 

 

4th Quarter

($ and shares in millions, except per share amounts)

2021

 

 

 

2020

 

2020

 

 

2020

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statements of Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil, natural gas and NGL sales

$

432

 

 

 

 

 

$

430

 

 

 

$

342

 

 

 

 

$

237

 

 

 

 

 

$

105

 

 

Net derivative (loss) gain from commodity contracts

(213

)

 

 

 

 

79

 

 

 

(125

)

 

 

 

(141

)

 

 

 

 

16

 

 

Other revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading revenue

98

 

 

 

 

 

45

 

 

 

53

 

 

 

 

38

 

 

 

 

 

15

 

 

Electricity sales

33

 

 

 

 

 

13

 

 

 

26

 

 

 

 

15

 

 

 

 

 

11

 

 

Other

13

 

 

 

 

 

6

 

 

 

5

 

 

 

 

3

 

 

 

 

 

2

 

 

Total revenues

363

 

 

 

 

 

573

 

 

 

301

 

 

 

 

152

 

 

 

 

 

149

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs

164